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Thursday, 9 August 2012

As we reach the final days of the London Olympics, your Katonomist took a look at two books on the economics of the Olympics and such sporting events from publisher Edward Elgar. She would like to pretend she read them whilst on a treadmill training for something interesting, but that wouldn't be true.

A chapter by Andreff addresses the winner’s curse (a
situation in which incomplete information in a bidding process will lead to
winner to overpay).The chapter maps out
the facts and figures associated with successful and unsuccessful bid and
identifies how the curse can play out.Unfortunately
for hosts, the chapter concludes that the winner’s curse, through cost
overruns, delays and debt, is more the rule than the exception.

IPKat readers will benefit from the chapter on “Stakeholder perceptions of short-term marketing tactics during the
Olympics.”The chapter examines
Canada-related marketing over a period of games and points out that consumers
are unlikely to differentiate between various levels of corporate
sponsorship.This calls into question
the value of sponsorship and the ability of the organisers to control rights
levels.

I rather enjoyed the chapter on the Tour de France which is
described as a "taxpayer bargain."Unlike
other international events, the Tour de France doesn’t involve a costly and
competitive international bidding process.Instead, cities and towns only host a day of the race and incur
relatively modest expenses in road upgrading and municipal services.The race also nicely shows off the French
countryside to millions of potential visitors.Sponsorship opportunities abound with team sponsorship, broadcasting
rights and the publicity caravan (which generated €8M in 2009.) The tour helps
maintain cycling as an important industry in France (worth €4.5B annually.)

Other chapters cover economics models to predict success,
willingness-to-pay methods of event evaluation, cost-benefit analysis, sustainability issues and other
economic impacts.Events covered include
golf majors, the FIFA World Cup, Summer and Winter Olympics and the
Commonwealth Games.There is also a
chapter examining the upcoming Rio games in
2016 and an analysis of employment in London 2012. (If I have any complaints, it would be that the book features few female authors, but that is true for economic publishing in general.)

Overall, the handbook covers the
various economic aspects of large sporting events and has rightly earned its 'handbook' title.Given its multi-author, chapter format, it is
easy to dip in and out of without reading everything in one go.It should appeal to economists, researchers, policy makers and potential
bidders.

Bibliographic data: 2012, 640 pp, Hardback 978 0 85793 026 2

Also available as an e-book 978 0 85793 027 9

The Economics of Staging of the Olympics, by Preuss (2004), is a comprehensive history and analysis of financial and economic aspects of the games from 1972-2008. If you're after the numbers and financial dealings behind the games, this is your book.

The book is chock full of
data and history. It aims to look at new
methods to assess economic benefits of the games and to compare the effects of hosting the Olympics across different games staged in
different countries in different years. It does so by focusing on three themes: financing, economic benefit and costs of the Olympics. Preuss points out that the economic incentives for hosting the games fall into four main categories: lower
health costs, improved
trade balance, tourism,
technology and prestige, and the ability
to promote otherwise hidden agendas.

Preuss quite rightly frames the Olympics as a franchise operation. He
provides a historical overview of the games and the fact that the economics of
the Olympics became moreimportant with
the deficit created at the Montreal games in 1976. The Montreal games created a debt of US$ 2.7B for the city and wasn't paid off until 2006. On the other end of the spectrum, the 1996 Atlanta games were derisively referred to as the Coca-Cola games due the fact the games were privately financed. Olympic games are now conducted with government warranties in order to smooth out financing.

Preuss devotes 100 pages of the book to dealing the revenues of the Olympics. He examines the selling of television rights and considers the legal and contractual structures of these rights. There are all sorts of interesting facts regarding the sponsorship and marketing measures and some handy diagrams of the various levels of sponsorship. Merchandising is increasing in importance and was worth US$45.9M in royalties in the Atlanta games and US$54.3M for Sydney. He also looks at Olympic coins (which are apparently a big deal) stamps and pins.

The Olympic brand is considered as an important asset of the games. Surprisingly, concerns about the dilution of the brand have been existed since 1938. Preuss looks at past The Olympic Programme (TOP) sponsors which include the usual suspects but used to include an official typewriter sponsor. He notes that the success of sponsoring programmes relies on a guarantee of exclusiveness for sponsors, protection against ambush marketing and the offering of sponsor packages.

Overall, Preuss's book provides an in-depth, comprehensive look at the economics and finances of the Olympics. The book merits reading in a sequential fashion, but readers interested in particular topics would still benefit from reading only specific sections. It does contain a number of graphs, tables and some equations, but the accompanying text is written in an accessible manner that should not put-off non-specialist readers.